|By Meg Green|
|A.M. Best Company, Inc.|
"We are analyzing European companies' investment risk and discussing with management the pressure points and their impact on risk adjusted capitalisation," Holzberger said.
Potentially, European insurers could lose up to 143 billion pounds (
That scenario isn't likely, Holzberger said. "We continue to feel that probability is very low, but it's something we need to watch closely," he said. "Considering that the severe down-side scenarios are not as remote as they were a few months ago, it's definitely a concern."
It's important to assess companies on a case-by-case basis, he said. In addition to sovereign debt exposure, companies may also have exposure to European banks that are holding significant amounts of European sovereign debt, Holzberger said.
Many insurers have reduced their holdings of sovereign debt and financial institutions, he said. "We would not prescribe what insurers or reinsurers should be doing, but we do want to know what they are doing to manage those exposures and how sensitive their capital is to further deterioration," Holzberger said.
Despite the uncertainty of the eurozone debt crisis, insurers overall have produced "strong earnings despite significant catastrophe losses this year," he said. "Earnings are very robust for many companies that we follow. On a pre-stressed risk-adjusted capital basis, the industry overall is healthy enough to withstand a certain level of deterioration in the economic environment and in their investment portfolios. It comes down to a question of severity," Holzberger said.
Further weakening of the economic environment holds significant implications for insurers with assets in eurozone countries (particularly
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